In the companies I've been in, the problem (while related) was a little less abstract.
The companies tended for whatever reason to promote from without rather than within.
So you ended up with an entire management team that really had no relation to product or service of the company. This rarely leads to the right decisions for a company.

Business school (and to a similar extent, night school MBAs) would seem to exacerbate this attitude.posted by madajb at 6:27 PM on December 21, 2009 [7 favorites]

I have been saying this for years. The focus on making money as an end and a means, instead of doing the thing your company is supposed to do is what's really fucked the American economy.

Well, it's one of the things that has, anyways. There are plenty of other dicks that have brutalized the rectum of the American economy, from the bordellos of K street to the chode of a "self-regulating market" to the butt-plug of the "always more growth" doctrine.posted by Jon_Evil at 6:42 PM on December 21, 2009 [6 favorites]

Americans can't make cheap shit using lots of labour. But the U.S. manufactures more, in dollar terms, then in the 1960s and 70s. Or the 80s and 90s.

The difference is that the number of manufacturing jobs has gone way down, due to automation. People constantly says "We don't make anything anymore", or "The U.S. lost it's industrial base" or whatever. It's absurd. We still make stuff, it's just that we make stuff with robots.

You could tell things were going in the wrong direction when you started hearing about COOs as distinct from CEOs, as though it made any kind of sense at all that the running of the company should be separate from the operations of the company.posted by enn at 6:48 PM on December 21, 2009 [3 favorites]

By the way, did you guys know the CEO of Toyota makes about $900,000 a year. That's it. The real American failure was the intellectual capture by "the CEO club" -- the people who run companies and sit on their boards, deciding on each others compensation and paying themselves insane amounts of money. Gorging themselves at the determent to their stockholders, often pension funds for people who have no idea what's going on.posted by delmoi at 6:51 PM on December 21, 2009 [37 favorites]

Ugh, this if fucking ridiculous:

The business schools had their own incentives to channel students into high-paying fields like finance, thanks to the rising importance of school rankings, which heavily weighted starting salaries. The career offices at places like Harvard, Stanford, and Chicago institutionalized the process—for example, by making it easier for Wall Street outfits and consulting firms to recruit on campus. A recent Harvard Business School case study about General Electric shows that the company had so much trouble competing for MBAs that it decided to woo top graduates from non-elite schools rather than settle for elite-school graduates in the bottom half or bottom quarter of their classes.

No surprise then that, over time, the faculty and curriculum at the Harvards and Stanfords of the world began to evolve. “If you look at the distribution of faculty at leading business schools,” says Khurana, “they’re mostly in finance. … Business schools are responsive to changes in the external environment.” Which meant that, even if a student aspired to become a top operations man (or woman) at a big industrial company, the infrastructure to teach him didn’t really exist.

Oh, I see. Basically their argument is that only Ivy League graduates are worth anything and the reason GE, GM and other industrial companies failed is because they had to hire worthless state school graduates.

Because anyone can dig a ditch. Understanding whether the ditch will make you money is a lot harder.

There is no functional difference in the Sacramento exurbs between paying someone $300,000 to big a really deep hole or build a house in the middle of nowhere. The failure of resource management is a serious concern, there is serious convergence of environmentalism and corporate investment management. We need to understand resource management and optimal distribution of resources, not how to make a car.

Complexity of manufacturing is on the precipice of getting really cheap. The marginal difference of a simple vs. complex object to a CNC machine has the potential to be the difference between a small image and a detailed image on your laser printer today.

We don't need to care about making stuff. Manufacturing is dead in first-world countries, we shouldn't try to compete in a skill-less low-margin environment. Give Africa a chance to industrialize before CNCs make manufacturing nearly free. We're reaching an age where we need to be increasingly efficient with our money/resources; determining resource allocation (investments) has become paramount.posted by amuseDetachment at 6:54 PM on December 21, 2009 [1 favorite]

People constantly says "We don't make anything anymore", or "The U.S. lost it's industrial base" or whatever. It's absurd. We still make stuff, it's just that we make stuff with robots.

There are entire categories of things that the U.S. does not make anymore. Shoes. Vitamin C. Lots of consumer electronics.

It all comes from China, purchased with a massive discount thanks to the Chinese acceptance of electrons instead of actual value - for now.

tended for whatever reason to promote from without rather than within.

Seen this myself. My girlfriend quit a company because they hired someone from outside for the position she had been performing (sans title and salary). She got out just in time, since a house of cards that had been built up by her boss brought it down about a year later...but hiring outside when there was better talent inside was one of the symptoms of that house of cards.posted by Jimmy Havok at 6:58 PM on December 21, 2009

"CEO Club" is just about the most surreal google search I've done:

The Chief Executive Officers' Club of Boston is a non-profit organization that creates a nurturing environment for CEOs dedicated to improving the quality and profitability of their enterprises through shared experience and personal growth.

Nurturing. Goddamn.

Anyway, delmoi, there was a really good graph about CEO compensation, showing some linked diagrams about large businesses and what boards have 90% of the same members -- the visual representation of the CEO club you mentioned.

While I was searching for it, I came across this WSJ article which apparently claims that health care sector CEOs make 40% more that their nearest non HC colleagues, at $12.4M a year. So goddamn if that ain't a problem that needs tending to.posted by boo_radley at 7:01 PM on December 21, 2009 [3 favorites]

Because it's cheaper with slave labor.

Want America to become manufacturing center again? Legalize slavery. Done deal!posted by HTuttle at 7:03 PM on December 21, 2009

The deeper issue behind delmoi's point is the near-universal fungibility of money. The same stuff can be acquired in a great variety of different ways, including earning it, stealing it, gambling for it, investing it, making stuff to sell for it, and so on. Having acquired money, it can be used for just about anything a person might want to have or do, and to some extent, to be.

Lacking any meaningful distinction in how money is acquired, it becomes optimal to acquire it by whatever method produces the greatest return per minute of activity. Currently that is to bet it in the gambling parlours of finance, and not at the ordinary person's level, at a level where some of the money can be allocated to ensuring that the investment return on the rest of the money is maximized.

What the financiers do with and in the wider economy is somewhat analogous, were they participants in a game of poker, to paying the referee to let them (and them alone) treat all twos as wild. They do not play by the same rules as the rest of us. But because money is near-universally fungible, they get to use it, however it was acquired, to buy the same sort of stuff that the rest of us might buy.

I have no real solution to that. Certainly no practical solution; even if forcing wadded cash into all bodily orifices of the whole wretched lot of them until they expired from it would be efficacious, it isn't practical. The fact that fungible money lets them buy protection from the vengeance of the proletariat complicates the matter just as much, if not more, than the fact that it lets them buy protection from the regulations of the government.posted by aeschenkarnos at 7:05 PM on December 21, 2009 [21 favorites]

There are entire categories of things that the U.S. does not make anymore. Shoes. Vitamin C. Lots of consumer electronics.

shoes, Vitamin C, Semiconductors (which you need for consumer electronics). There are also companies that do final some assembly in the U.S like Dell.

The fact is you're talking about stereotypes, not facts. There is a lot of manufacturing being done in the U.S. But thing is, look at medical devices, or high end cameras, not to mention all the military hardware made in the U.S. There is a lot of stuff that's made in the U.S.

If you want to say "less" that's fine, if you say "none" that's wrong.posted by delmoi at 7:14 PM on December 21, 2009 [3 favorites]

Why can't Americans make things?

Because alienating industries from the consequences of their actions while still having a built in market half-way around the world is working really well. For them.posted by The Whelk at 7:19 PM on December 21, 2009 [1 favorite]

Even then, there are about 13 million people working in manufacturing jobs in the U.S. according to this article.

Hokay. . . were is the wealth-creation available to the middle class going to come from? Farming? We tried selling homes back and forth to each other this decade, and that didn't work out so well. . .

Retail is associated with distribution of wealth, but is rather low on the totem poll.posted by tad at 7:22 PM on December 21, 2009 [4 favorites]

Oranges are not Vitamin C.

I'm talking about pharmaceutical grade ascorbic acid. In 2006, more than 85% of the vitamin C used in the U.S was produced in China. You can read about the resultant price fixing here.posted by Mjolnir at 7:26 PM on December 21, 2009

In the case of saccharin, Chinese producers had been accused by the U.S. Commerce Department of dumping. Then in March 2003, five companies formed a "Saccharin Sub-committee" of the China Chamber of Commerce, a quasigovernment body. They declared that low prices no longer made sense now that they had overtaken their U.S. and South Korean rivals.posted by Mjolnir at 7:27 PM on December 21, 2009

Semiconductors (which you need for consumer electronics).

Here where I am in the heart of Silicon Valley, electronics is becoming a wasteland.

"The North American industry in 2009 will produce $3.3 billion, down from $9.9 billion in 2000, a 67% decline. "[1]posted by tad at 7:30 PM on December 21, 2009 [1 favorite]

delmoi: "We still make stuff, it's just that we make stuff with robots. "

Sure, but I think it's worth thinking about why that is — although it's popular in some circles to demonize MBAs and management generally, it's not like all the factory owners of the world got together one afternoon and decided to fire all their employees and replace them with robots. It's just that robots, and other forms of industrial automation, are pretty much the only way for a manufacturing concern in the developed world to compete.

An interesting case study of this is Sherline Products, a California company that manufactures small metalworking tools (principally a small lathe). It's a relatively small, privately-owned company, and pretty much the brainchild of one guy. Their product competes directly with imports from China and India (Unimat knockoffs), but the only reason it can do so — managing to arrive anywhere near a competitive price point — is because its designed to be produced with minimal labor. While the Chinese Unimats are essentially a 50+ year old design, with a substantial number of cast iron parts and much hand assembly, the Sherline is built around an aluminum and composite extrusion, with other parts done by CNC. I suspect that the factory which manufactures the Sherlines contains orders of magnitude more capital investment than the factories in China, but many fewer employees.

Our trade policies led directly to a very different sort of trade, within our own borders: that of labor for capital. A lathe factory in China has minimal capital investment, but requires much labor; to compete with that factory, one in the U.S. requires huge amounts of capital in order to minimize labor costs.

Whether that was consciously made or not, when we opened our borders to low-cost manufactured goods in the last several decades, I'm not sure. On paper, it might look like a good idea — offshore the low-value jobs (pouring hot iron into sand molds) to China, while retaining the high-value ones (maintaining CNC production lines, design work) here. But there are far fewer of the latter kind of jobs than there were of the former, and an entire generation of workers — and large swaths of the country — were left behind.

It's probably too late now to go back, but we should at least take a hard look at the decisions we made, who made them, and why they made them, as we move forward and make policy decisions in the future.posted by Kadin2048 at 7:31 PM on December 21, 2009 [12 favorites]

Hokay. . . were is the wealth-creation available to the middle class going to come from?

Ah, the future of class in America. That's easy. The working classes will continue to scrounge the crumbs of American society, living off (dwindling) government handouts, selling drugs, filling up for-profit prisons and swelling the ranks of our Military to become cannon fodder on some distant battlefield.

The middle-class will subsist on menial retail/foodservice/IT jobs and occasionally selling street drugs as well. The upper-middle-class will work in the massively bloated petroleum, defense and healthcare industries.

The upper classes will work almost entirely in finance and occasionally dabble in public office.

Actually, I really shouldn't have used the future-tense in that scenario, since that pretty much describes America at this very moment.posted by Avenger at 7:33 PM on December 21, 2009 [23 favorites]

I have no real solution to that.

I've got one. We need to escape the idea that money above all else, instead of doing good work with money to allow you to keep doing it, is the ultimate purpose of business.

What's that you say, too impractical, too Pollyanna-ish? Okay then, see you in thirty years when we'll be having this exact same problem.

So long as we try to fix business through legislation alone people will find ways to get around, or surreptitiously break, the laws, and that will create competition pressure that will force others to break them too. Enforcing the laws is practical only when law-breaking is an exception instead of a rule. Real change will not come until we also attack the motive, so business people will feel some obligation to police themselves.

Do I think this will ever happen? Probably not in the near future. But the far future is a strange place and impossible to see from here.

Yeah, I know I'm opening myself up for mockery for this one....posted by JHarris at 7:37 PM on December 21, 2009 [2 favorites]

At least we're still really good at music, movies, microcode, and high-speed pizza delivery.posted by Iridic at 7:39 PM on December 21, 2009 [17 favorites]

Hey, Avenger: can you think of any other massively bloated industries? I knew about defense, and I don't find healthcare appealing. I didn't think about the petroleum industry until you mentioned it. Basically, I need to find industries that will hire an aging systems programmer.posted by Crabby Appleton at 8:03 PM on December 21, 2009

At least we're still really good at music, movies, microcode, and high-speed pizza delivery.

I think the only duty of a public corporation is a fiduciary one to its shareholders, isn't it, at the end of the day? And that's nuts. It removes the onus from a company like Ford from being really good at making cars, to one of being really good at returning short-term profits.

I'm not sure what the fix is. Make it illegal to day trade, that shares must be held for a minimum period of time, measured in months or years (the idea being to make long-term sustainability more important that quarterly returns)? Eliminate stock compensation for officers? Legally limit the total compensation directors can be paid to some reasonable multiplier of the lowest paid employee or contractor?

The idea would be to remove corporations as financial playthings of wall street. Probably pinko commie and untenable.posted by maxwelton at 8:07 PM on December 21, 2009 [1 favorite]

Make it illegal to day trade, that shares must be held for a minimum period of time

A Tobin-style tax on financial transactions would take care of that problem. Tax every financial transaction just a little bit, and those lightening-fast trades that rely on tiny shifts of value, and create self-reinforcing bubbles, will no longer be practical.posted by Jimmy Havok at 8:23 PM on December 21, 2009 [10 favorites]

"Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

please don't tell the republicans this - they'll be all over it like a bum on a baloney sandwichposted by pyramid termite at 8:28 PM on December 21, 2009 [2 favorites]

Manufacturing is dead in first-world countries, we shouldn't try to compete in a skill-less low-margin environment.

This is silly. Germany is still a first world country, as is France. There is plenty of manufacturing that happens there.

Furthermore the net number of manufacturing jobs worldwide is declining. Automation is replacing the need for workers. Manufacturing jobs are declining in China, where even rudimentary automation is replacing some of the manual labor workforce that drove that countries export boom.

It removes the onus from a company like Ford from being really good at making cars, to one of being really good at returning short-term profits.

Ford is very good at making cars. So is GM. Four of the top ten cars sold in Europe last year were made by Ford and GM (Opel/Vauxhall). The difference is that they were made in Europe, not in the US. During the vaunted cash for clunkers program, the most popular "clunkers" turned in were old Ford F150s. The most popular car bought with the proceeds? New Ford F150s.

The reason we don't make anything is because we don't want to. Given all the onerous restrictions imposed by labor and environmental regulations, along with unions, healthcare, etc. It is easier to simply pay to buy stuff made elsewhere.posted by Pastabagel at 8:30 PM on December 21, 2009 [3 favorites]

The problem is that these students tended to be overachiever types motivated primarily by salary rather than some lifelong ambition to run a steel mill.

That has to be the one of the most ignorant, evil things I've ever heard said. I rarely wish ill on anyone, but I hope your job get shipped overseas and you starve in the streets.

See, that's a dumb attitude to take. There are a lot of jobs that just don't need doing. But rather then pay people to sit around and do nothing, we erect all kinds of trade barriers and subsidies to keep the work profitable. It's a sideways kind of welfare, one that rewards busywork because we've got to "keep taxes low" even though regulatory barriers cost more and we can't have "welfare" even though a job regulated into existence is still a type of welfare.

Is that counting the hamburger manufacturing jobs?.

No, it doesn't. In fact the article you linked to is simply about a report that discussed the idea that burgers might theoretically be considered manufacturing, but didn't actually say burger creation should be counted as such.

The beauro of labor statistics actually keeps detailed records of job titles and industries, and it does not count hamburgers. All your link shows is that someone once had the thought that making a hamburger was kind of like manufacturing.

please don't tell the republicans this - they'll be all over it like a bum on a baloney sandwich

They'll reject it and demand money? Sounds about right...posted by Inspector.Gadget at 8:39 PM on December 21, 2009

Jimmy Havok: "Tax every financial transaction just a little bit, and those lightening-fast trades that rely on tiny shifts of value, and create self-reinforcing bubbles, will no longer be practical."

A Tobin-style tax would prevent high-speed securities arbitrage, but unless the tax was very high — higher than most proponents of such a tax that I've ever talked with have proposed — it wouldn't do much to curtail the quarter-by-quarter earnings obsessiveness that dominates the management of most public companies.

The people sitting on the boards at big public corporations aren't buying and selling shares every day; they're probably doing it a few times a year, if that. The problem isn't one of arbitrage (in this instance), it's one of shortsightedness and an obsession on share price and quarterly earnings.

A small transaction tax would stop high-volume algorithmic trading and perhaps cut down on volatility, but (unless it's much larger than any proposal I've ever heard of) it wouldn't get at the underlying cultural issues. The trade volume isn't that high.

There probably are various things that could be tweaked on the tax-policy end, like having different capital-gains rates depending on the length of time a security has been held (say, 30% for 1 yr or less, 25% 1-2 years, 20% 3-5, tapering down from there; this has a bonus of putting a low tax on "granny stocks" and a high tax on day traders) but I'm not sure they're really "Tobin-style" taxes anymore.

Tobin taxes are a solution to a different problem, namely that of very short-term speculation and arbitrage (originally in currencies) leading to unnecessary and destructive volatility. Getting publicly-held corporations to look and plan further than a few quarters out is a more tricky problem. Reducing market volatility might help, but it's certainly not a panacea.

On paper at least, employee-owned enterprises look pretty good — I could imagine an employee-owned enterprise, motivated not only by share-price concerns but also by a desire to keep the company competitive in the long haul, having a longer planning horizon and thus eventually outmaneuvering traditional publicly-held companies. However, their track record at least in the U.S. is mixed. I'd like to see more study and encouragement in that direction, which might also be a lot easier than a transaction tax.posted by Kadin2048 at 9:20 PM on December 21, 2009 [7 favorites]

See, that's a dumb attitude to take. There are a lot of jobs that just don't need doing. But rather then pay people to sit around and do nothing, we erect all kinds of trade barriers and subsidies to keep the work profitable.

Actually, there are a lot of jobs that need doing, like making drywall, food and toys that don't poison us, something the Chinese can't seem to do. On the consumer side, we've gotten used to stuff so cheap that we don't complain when it's crappy. I just had several weekends worth of frustration trying to plumb up my garage for compressed air. No matter what I did, the threads leaked, I finally looked carefully at the pipe threads and saw that they had flat tops. So I disassembled everything and ordered new american made stuff from McMaster-Carr (turned out to be cheaper than the crappy Harbor Freight stuff I had gotten locally anyway).

Upthread someone complained about the short sighted daytraders, their influence is compounded by mutual funds and index funds. People are given incentives to save for retirement (a good thing), but index funds some of every company, whether the management is making good decisions or not. Of course, it is assumed that the price is set by the market so that bad companies will be cheap, but who is the rest of the market? It's daytraders and other speculators that know nothing about the companies that they own.posted by 445supermag at 9:20 PM on December 21, 2009

Did these steel mill-lovin' freaks ever exist?

I imagine "back in the day" when managers were not required to have MBAs, there were probably quite a few lower rank folk working in steel mills who aspired to run a steel mill someday, as part of their career advancement.

But yeah, if you are going to hire your management direct from schools, then of course the people training to be managers want to manage the most glamorous things.posted by selenized at 9:21 PM on December 21, 2009

There is a lot of stuff that's made in the U.S.

Yes, delmoi, there is. And all you have to do is look at the trade deficit to see that it isn't enough.posted by Malor at 9:23 PM on December 21, 2009 [2 favorites]

Perhaps my experience as both a game beta tester and an IT consultant can add something to this discussion. In both cases the feedback from the grunts, either QA for a game or QA for software gets stuck somewhere up "the tube" so to speak.

In my position as a game tester it seems that at some point my information goes from being useful to the developers to an annoyance to... well, somebody. And it ends up ignored.

When I worked at a Fortune 500 company during a hardcore software upgrade, we were essentially kept in a room and fed sloppy less-than-alpha code on an hourly basis. This was the code that we used to transfer client's information from laptop to laptop.

The error rate was abysmal and we couldn't understand why we were getting constant "upgrades".

Client information was lost and people were fired.

Meanwhile, a few of us kept reasonably good working code, old versions, on our flash drives. We'd use that and get work done. We had to convert 5000 laptops from one OS to a new one in three months.

Finally when we were done, the four of that were left felt like we had been through a war.

We all hoped that we would get a permanent position at said company.

The guy that got the permanent position was the guy that ratted us out on the last day and had our flash drives confiscated.

Yeah. That's right.

Amreican companies seem to be cutthroat arenas full of assholes. But that's just one drone's opinion.

BTW, they promised clients new hard drives and used old drives instead. The failure rate was unbelievable. And we were blamed.

The thing that they hated the most? When we didn't work our usual 16 hour day on Christmas Eve.

All your link shows is that someone once had the thought that making a hamburger was kind of like manufacturing.

Actually, drilling down would discover it's just more Mankiw free-trade wankery. Who needs manufacturing? Hamburger-making is kinda manufacturing, innit? We'll just make it up in services!

The more central point is that creating wealth is the key to prosperity. The flow of dollars -- Government Spending from issued USGOV bonds bought by China's central bank thanks to through their exporters taking our cash from our importers -- is not something I really have my head around yet, but doesn't strike me as particularly healthy since all this debt is consumption and not particularly accretive to future earnings. Something's going to have to give eventually.posted by tad at 9:45 PM on December 21, 2009

delmoi: Oh, I see. Basically their argument is that only Ivy League graduates are worth anything and the reason GE, GM and other industrial companies failed is because they had to hire worthless state school graduates.

No, the argument is that their priorities were in the wrong places. When hiring based on one useless metric (Ivy League or not) produced failure, they switched to a different metric (class rank) which proved equally useless.posted by Jon_Evil at 9:50 PM on December 21, 2009

Yes, delmoi, there is. And all you have to do is look at the trade deficit to see that it isn't enough.

Either that, or we're importing a bunch of crap we don't need and could live without if it was more expensive. The annual trade deficit in 2008 was $677 billion, with a GDP of 14.2 trillion. So basically about 5% of the GDP. It probably wouldn't be too hard to replace that stuff.posted by delmoi at 9:52 PM on December 21, 2009

Meanwhile, a few of us kept reasonably good working code, old versions, on our flash drives. We'd use that and get work done.

Oh man, I hate when people do that - silently working around a problem instead of getting it fixed. Maybe if you all had problems, the company would have had to get to the bottom of why. Instead, some of you had problems, and others didn't. Obvious [to a non-techie business type] answer, fire the ones who do.posted by ctmf at 9:57 PM on December 21, 2009 [1 favorite]

Huh? Did these steel mill-lovin' freaks ever exist?

You take a pile of rocks and turn it into something highly useful. Some people take pride in that sort of thing.posted by Anything at 10:06 PM on December 21, 2009 [8 favorites]

Given all the onerous restrictions imposed by labor and environmental regulations, along with unions, healthcare, etc. It is easier to simply pay to buy stuff made elsewhere.

The managers manage the people who turn the rocks into something useful. They're cogs in the great machine, using management techniques that could apply to any industry. It's not art here. In any case, steel mills used to turn the air in Birmingham AL blue, you know. It's a tough industry to romanticize.posted by raysmj at 10:51 PM on December 21, 2009

Oh man, I hate when people do that - silently working around a problem instead of getting it fixed. Maybe if you all had problems, the company would have had to get to the bottom of why. Instead, some of you had problems, and others didn't. Obvious [to a non-techie business type] answer, fire the ones who do.

Our group did not write code. We used the code as a tool. We used the tools that worked best to come in under budget and under the time allowed.

We were essentially hardware monkeys. Not code monkeys. But we were reasonably intelligent monkeys.

OTOH we didn't have the time to learn to code. This monkey is learning to code. But it takes time.

We used the tools that worked best to come in under budget and under the time allowed.

The point was if you weren't following procedure in exercising the code drops then the system was broken and you were making it (the system) worse by not causing the requisite feedback pain it requires to operate correctly.

Granted, getting the job done should trump procedure, but . . . you know how the suits work . . .posted by tad at 11:05 PM on December 21, 2009

FTLA: "Since 1965, the percentage of graduates of highly-ranked business schools who go into consulting and financial services has doubled, from about one-third to about two-thirds."Table 4. From census.gov: "Percent of the Population 25 Years and Over with a Bachelor's Degree or Higher by Sex, Race, and Hispanic Origin, for the United States: 1940 to 2000" Figures shown are for males and females combined.
1940 1950 1960 1970 1980 1990 2000
4.9 6.6 8.1 11.3 17.1 21.5 26.1posted by vapidave at 11:43 PM on December 21, 2009

Why can't Americans make things?

A: Say, B, I've got a Really Cool Concept that will change the world. Mind if I just call it an RCC?

B: You can call it whatever you want. I'm just going to need approval from C.

A: Okay! No prob. I've run some tests and this RCC is going to solve poverty, world peace, hunger, you name it!

B: Okay, A. No need to get too excited. Hey, C!

C: Yeah? What do you want? Can't you see I'm busy.

B: A here has a...what was that again?

A: A Really Cool Concept.

B: A Really Cool Concept.

C: Oooooh, I don't know. I'm a little wary of it. I'm going to have to take it down to D, who is in the Marketing Department. Hey, D?

D: No, that won't do at all. Were going to have to change that and that and that.

Four of the top ten cars sold in Europe last year were made by Ford and GM (Opel/Vauxhall). The difference is that they were made in Europe, not in the US....

The reason we don't make anything is because we don't want to. Given all the onerous restrictions imposed by labor and environmental regulations, along with unions, healthcare, etc. It is easier to simply pay to buy stuff made elsewhere.

So you're saying that there are no (or weaker) abour or environmental standards, no unions or healthcare, in the UK (Vauxhall) or Germany (Opel)? I think that you are mistaken.posted by Infinite Jest at 12:19 AM on December 22, 2009 [1 favorite]

Why can't Americans make things any more?

I'm not sure. I'll ask my friends at Intel.posted by msalt at 12:26 AM on December 22, 2009

or we're importing a bunch of crap we don't need and could live without if it was more expensive.

Delmoi

A lot of this depends on your preferences, but most observations point to the idea that we're producing too much of what we don't need (material goods) and not enough of what we do (knowledge goods). But framing this as a supply/demand/price issue is too simple and really makes a red herring of both of these ideas.

Gorz has it better when he talks about the needle's eye of valorization. This also explains in detail the accelerating crises of financial markets (which have really helped as long as they could), the decline of manufacturing, the futility of wedding property rights to digital content and why we haven't moved beyond the current program for incentivization.

You take a pile of rocks and turn it into something highly useful. Some people take pride in that sort of thing.

My understanding is that this pride was based on supplying a more legitimate demand than now currently exists.

Personally, my tools weight more than my car, the end vise in my workbench has redheart inlay and I'm fixing to re-CNCify the mill I bought a few years ago (then come the ball screws) after I finish making new wooden windows for my house.

I think it's safe to say that there's a whole lot of freakery going on out there you might be missing.posted by Kid Charlemagne at 3:42 AM on December 22, 2009 [3 favorites]

Well, I've actually read the Hayes and Abernathy paper he's quoting (I've got it in front of me as I cite it in my MBA dissertation actually). AND the followup articles. Curious that Scheiber directly quotes a 29 year old article without citing either followup Hayes and Abernathy themselves published as recently as two years ago. Or any of the related literature. I've got the relevant details here.

The original article:

Hayes, Robert H., and William J. Abernathy. "Managing our way to economic decline." Harvard Business Review 58.4 (1980): 67-77.

And their most recent article:

Hayes, Robert H., and William J. Abernathy. "Managing Our Way to Economic Decline." Harvard Business Review
85.7/8 (2007): 138-149

I've posted the full cites so those of you who are interested and have access to an academic journal database can read both articles if you'd like. Regardless, Hayes' (Abernathy is deceased) comments are interesting. I can't post his update verbatim, but :

"Today, however, a mastery of the old basics no longer suffices, because fundamental changes in the world economy have added more items to the list."

"Rapid advances in international communications and transport have made it possible to outsource activities that companies had previously performed internally."

"These trends mean that the capability to get multiple, far-flung organizations to operate in concurrent fashion has become de rigueur."

"Managing the complex information technology that networked organizations require is another new basic"

The conclusion of Hayes' update is pretty clear:

So if a new “Managing Our Way” article were written today, it would have to go beyond its call for managers to re-embrace the traditional basics – to invest, innovate, lead, and create value where none existed before. It would have to encourage them to be pioneers in creating and implementing a new set of essentials to prevail in today’s networked, virtual world.

Its well known that American companies are quite capable - often world class - in terms of these globally distributed, complex, multi party / multi technology types of engagements.

Another thing that I find interesting is blaming business schools for this problem. It all seems to start here:

" The business schools had their own incentives to channel students into high-paying fields like finance, ... "

I teach finance part time at three Universities here in London, and I can say unequivocally NONE "channel" students into a degree track. Students come knocking on the door and select a degree, pretty much all by their lonesome. They do get some degree of guidance, but Mrs Mutant just finished a Masters degree (Information Management & Finance) and her experience with admissions was more benign indifference that active guidance. 'Course she entered the programme September 2008, but I doubt anything has changed that significantly since.

Now teaching. Well my professional and educational background is capital markets (MSc Quantitative Finance, lots of risk management / trading / etc experience working for Tier I global banks). I teach 'Econometrics' at one University and 'Corporate Finance' and two others.

What I find interesting are students attitudes in the Corporate Finance classes.

According to my highly subjective sample, there is a predisposition towards capital markets. The greater majority of students just aren't interested in the nuts and bolts of how to run a business.

Lets look right at the syllabus of one of my courses, and comment briefly on boredom & engagement factors :

Organisational Theory -- optimal structure for an organisation, purposes and roles of CEO, CFO, COO, The Board, Executive and Non executive directors. Me: You gotta know this in detail to understand how and why companies are run, what they do and why they do it. Students -- we're not too bothered.

Business Plans, Balance Sheets, Profit and Loss Statements, Cash Flow Statements, Basic financial forecasting. Me: More nuts and bolts, you don't know this you won't understand how companies are run, won't be in a position to comment nor understand on business. Students -- not interested.

Securities valuation, equity & debt markets, raising capital. Me: minor but important part of running a business. Students HELL YEH BRING IT ON.

Cost of capital, cost of equity, cost of debt, structured products, the start of a deluge of mathematical models. Me: important to understand, critical component of pricing, not central to running a business. Students WE LOVE THIS SHIT.

Share pricing, DCF, Gordon Growth Model, CAPM, lots of mathematical models. Me: This something that you have to know but most companies push this out to an Investment Bank to realise. In other words, not important to running a business. Students MORE MORE .

Investment Appraisal, this is mathematically intensive and we do it in two lectures according to DCF and non DCF techniques. Me: this is something that only specialised parts of the management structure will get involved in. Once again, not central to running a business. Students MORE MORE MORE.

Sensitivity Analysis, dealing with limited capital. Me: very important to know as this is how companies can improve the rigour of their planning. Students -- boring.

Dividend policy, who and why firms pay a dividend. How much can they pay, etc., share buy backs instead of dividends. Me: big part of management as this is what helps firms attract capital. Students -- not interesting.

Working capital management. Me: 90% of all companies that fail do so because they haven't managed working capital properly. This is absolutely critical for yourselves as managers to know. Wilson's Economic Order Quantity (EOQ) is just the start. Students -- big yawn.

I could go on, but its clear that students come in with a predisposition towards finance, trading, etc.

I try to point out that if you'd like to learn how to run a business, these other topics are totally interesting, totally engrossing and not to be ignored. But almost always they don't want to know, even those who aren't in a finance track (e.g., ACCA or CIMA accounting) are hyper interested in trading and capital markets.

So that's part of the problem. I'd have to call it cultural rather than blaming an easy target, business schools.

It seem most folks just want something easy these days, they don't really want to labour in the nuts and bolts of a bank or any other business, when they can see themselves out there on a trading desk.

And that's a damn shame. There are some very well respected career to be had in a bank working in, for example, Controlling, that isn't front office. The demand for these positions is steady and they pay really, really well so I just don't get why students these days aren't attracted to them.posted by Mutant at 3:52 AM on December 22, 2009 [23 favorites]

Remember in Star Trek (Kirk, not Piccard) where you meet the "beings of pure energy" and what they really need to do is get back to nature, or do some handcrafts or just get laid but they're now beings of pure energy so they pretty much have to content themselves with 60's era therapy and so it sucks to be them. The problem is that our culture seems to have bought into the fact that we're them without any of that tedious evolving into beings of pure energy nonsense.

I mean look at Mutant's students. They clearly believe that profit is some kind of field effect effect that is induced in a corporation by the movement of money. "Capital? You mean like the means of production? It will be difficult for your human mind to comprehend, but we have evolved far beyond that primitive state!"posted by Kid Charlemagne at 4:26 AM on December 22, 2009 [5 favorites]

I could go on, but its clear that students come in with a predisposition towards finance, trading, etc.

I thought it was universally understood, outside of right-wing political circles, that the "problem" with American manufacturing and innovation was a culture of lethally short-sighted, clueless and incompetent management who chase a quick buck instead of long term value.

Example: Subaru, Honda, Kawasaki, Toyota, Mercedes - they all manufacture vehicles in the USA, and in some instances re-export them.

Hell, Tiger Truck, a subsidiary of ChangAn, opened a plant in Oklahoma for the sole purpose of exporting vehicles back to China. You can't even buy a road-legal Tiger in the US!

The only companies who don't realize the advantages of the USA as a center for manufacturing are American... and these would be the ones run by MBA-miracles that American B-schools are barfing out.posted by Slap*Happy at 6:16 AM on December 22, 2009 [1 favorite]

Slap*Happy, aren't all of those plants non-union? Any references I can find suggest that UAW hasn't organized any US-sited foreign car assembly plants yet. If true, it seems that this speaks to at least some shared level of culpability between feckless management and short-sighted labor demands.posted by jenkinsEar at 7:32 AM on December 22, 2009

The creation and management of an underclass is already a done deal. The brave new world of techno-driven abundance -- if by abundance you mean only more commodities -- looks to look like this:

THE ALPHAS: A relatively small number of tenders of hightech, allied with essential tenders of people (entertainers, politicians, clergy, military officers, journalists, police chiefs, etc.). They will continue to work -- harder, in many cases, than anybody -- to keep the system, and each other, working.

THE BETAS: In lieu of the old-time middle class and middle management which, as Rifkin explains, are obsolete, there will be a social control class of police, security guards, social "workers," schoolteachers, daycare workers, clinical psychologists, with-it parents, etc. It merits special attention that the more robust and aggressive members of what used to be the working class will be coopted to police those they left behind (as one Gilded Age robber baron put it, "I can hire one-half the working class to kill the other half"). Thus the underclass loses its leaders even as it's distracted by the phantasm of upward mobility.

THE GAMMAS: The vast majority of the population, what Nicola Tesla called "meat-machines," what Lee Kuan Yew calls "digits," what Jeremy Rifkin is too embarrassed to call anything. They cannot be controlled, as the other classes can, by work, because they don't work. They will be managed by bread and circuses. The bread consists of modest transfer payments maintaining the useless poor at subsistence level as helpless wards of the state. The circuses will be provided by the awesome techno-spectacles of what, in the wake of the Gulf War, can only be called the military-entertainment complex. Hollywood and tne Pentagon will always be there for each other.
Gammas form a mass, not a class, a simple aggregation of homologous multitudes, as Marx characterized the peasantry, "just as potatoes in a bag form a bag of potatoes." They enjoy certain inalienable rights -- to change channels, to check their E-Mail, to vote -- and a few others of no practical consequence. Wars, professional sports, elections and advertising campaigns afford them the opportunity to identify with like-minded spectators. It doesn't matter how they divide themselves up as long as they do. As they really are all the same any differentiation they seize upon is arbitrary, but any differentiation will do. They choose up teams by race, gender, hobby, generation, diet, religion, every which way but loose. In conditions of collective subservience, these distinctions have exactly, and only, the significance of a boys' tree-house with a "No Girls" sign posted outside. Gammas are essentially fans, and the self-activity of fans is exhausted in their formation of fan-clubs. They are potatoes who bag themselves.

THE DELTAS: This set-up will engender its own contradictions class societies always do. Bill Gates to the contrary notwithstanding, frictionless capitalism is an oxymoron. There'll be plenty of potholes on the information superhighway. Every class will contribute a portion of drop-outs, deviants and dissidents. Some will rebel from principle, some from pathology, some from both. And their rebellion will be functional as long as it doesn't get out of hand. The Deltas, the recalcitrants and unassimilables, will furnish work for the Betas and tabloid-type entertainment for the Gammas. In an ever more boring, predictable world, crazies and criminals will provide the zest, the risk, the mystery which the consciousness industry is increasingly inadequate to simulate. VR, morphing, computer graphics -- all very impressive, for awhile, but there's nothing like a whiff of fear, the scent of real blood, like the spectacles nobody did better than the Romans and the Aztecs. The show they call "America's Most Wanted" -- that's a double entrendre. Societies don't necessarily get, as some say, the criminals they deserve, but nowadays they get the criminals they want.

The greater majority of students just aren't interested in the nuts and bolts of how to run a business.

This about hits it. There was an interview this past weekend in the Financial Times with Michael O'Leary (Ryanair) and what he has to say about MBAs is not polite.

I see a difference between businessmen (Mr O'Leary) and corporatemen (drones of whatever rank). The former are really into the business almost for its own sake (think microbreweries, as an example). The latter are all about protecting the job by whatever means necessary (think every job you've ever had working for the Man).

"Section 1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

please don't tell the republicans this - they'll be all over it like a bum on a baloney sandwich

Assembling a car in the US is only a subset of manufacturing. It's mainly done to provide an excuse for foreign car buyers. Not only are just about all of the plants non-union, they're nearly all in red states.posted by rfs at 7:49 AM on December 22, 2009

I know scads of finance people and corporate lawyers, and am both, myself.

While some truly love the stuff, many more would much prefer to be engaged in the making and selling of tangible goods (or at least more-tangible services). The only reason that they didn't elect to pursue general management, engineering, marketing, writing/art/etc. and the other career paths which end up in those tangible-output trades pay less and are at least as risky. You've really got to love hardware to take on a M.Eng. and a $90,000 starting salary in mechanical engineering, when an MBA will get you $150,000 starting salary in finance and no more long-term career destruction risk.

Now, truth be told, GE and Procter & Gamble don't have much trouble staffing up their management training programs, but if they paid in line with Morgan Stanley (or even Bain) they would be buried under the resumes of the very top of the MBA classes at every top 10 business school.

Even with a worse risk-reward matrix, the lure of tangible-output work is profound and ultimately hard to resist -- no lack of ex-lawyers and bankers working on iPhone ap startups, opening up gourmet cheeseshops, trying to get hired to write sitcoms, etc. Not many people heading back for graduate degrees in mechanical engineering or operations research, though...posted by MattD at 7:53 AM on December 22, 2009 [1 favorite]

Boeing is Union - from the guy sweeping up to the engineer working on aerodynamics. Their economic problems stems from outsourcing, not organized labor, and seems to have resolved itself now that they're pulling production back in-house.

One of the foreign car plants is unionized (trying to track down which one, my google-fu is failing me), tho not with the UAW, IIRC.

More importantly, almost all of the European and South Korean plants will be unionized, and they seem to be going gangbusters... except for SAAB and Opel, who were run into the ground by American B-School Bozos.posted by Slap*Happy at 10:53 AM on December 22, 2009

Interesting piece on the Protocol Economy by David Brooks in the New York Times today. He declares an end to the era of mathematical modeling and the dawn of a new era where sociologist and anthropologists drive prosperity with insights into order and instruction. Worth a read.posted by Toekneesan at 10:54 AM on December 22, 2009

Oh man, I hate when people do that - silently working around a problem instead of getting it fixed. Maybe if you all had problems, the company would have had to get to the bottom of why. Instead, some of you had problems, and others didn't. Obvious [to a non-techie business type] answer, fire the ones who do.
posted by ctmf at 12:57 AM on December 22 [1 favorite +] [!]

You know what I hate more? Being the person who can see how to fix the problem and how the system could be organised to make my job easier and incidentally save the company money by not paying me to sit there working with bad tools, and then going to my manager only to find that they a) don't really understand what I'm telling them about the system that they have been using for years longer than me and b) that they will just tell me to keep using this bad tool. I'm working in a place with a fatal flaw in the design of the database that is the core of their business -- but I'm a temp, and no one wants to hear how the database could be made better from me.

People make the silent workarounds because in every other direction they have hit a wall. My fellow temp and I have figured out how to make a social/information workaround to mitgate the flaw in the database design that will at least make the job of the people who follow us easier. We won' t stop doing this, because it's either do this, or do nothing.

On a completely different topic, I want to take Mutant's class on organizational behaviour. But then again, I'm the kind of person who would go to grad school in the social sciences, and wouldn't go to business school, because all that talk of sales and profits and trading bores me. I'm much rather talk about organizational systems and deal with problems of information management.posted by jb at 8:21 PM on December 22, 2009 [4 favorites]

The thing that they hated the most? When we didn't work our usual 16 hour day on Christmas Eve.

Yeah, you know, I used to miss those days working for failed dotcoms. Well, not really, but the paychecks ... Well, come to think of it, we worked far too many hours for the salary. OK, so, I make a decent living (for the area) with benefits at the moment, my rent is reasonable ... I don't miss those days at all anymore. Working for a small ISP in a small resort town has its disadvantages, but I am grateful it's not Silicon Valley.

Oh, and I'll be with my family tomorrow night. I just put it on the calendar, and nobody said squat, because most of us take tomorrow off.posted by krinklyfig at 8:49 AM on December 23, 2009

Seems logical to me that running companies takes education and hard experience. The best way to acquire both is an internship program where students work in companies while studying in school. That way they can move back and forth in two worlds, receiving information and mentoring from seasoned people whose years of experience and practical knowledge can shape their development, help them brainstorm their new ideas or impressions against a backdrop of those who have been there and know that for everyone's benefit and truly create positive relationships where different approaches are appreciated and can be tried out in the field now not just dreamed about.posted by JeanneCasatelli at 12:40 PM on December 23, 2009

Because anyone can dig a ditch. Understanding whether the ditch will make you money is a lot harder.

I'm guessing you don't own a shovel, right?

Dr Dracator: Shovels are for shifting loose material. The correct tool for digging is a "spade"... you can buy them in hardware stores.posted by mr. strange at 2:26 PM on December 25, 2009

Now that I didn't know - guess that's what management is for, huh?posted by Dr Dracator at 12:20 AM on December 26, 2009

Hardly, I've never known a manager who was prepared to call a spade a spade. "Manual earth-moving utensil" at best. And then the consultants come in and tell them that if they lose the spades and we dig with our hands, they'll save almost enough to pay for their bonuses.posted by Grangousier at 6:14 AM on December 26, 2009

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